Why Amazon doesn't scare Apple

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The Fire has the potential to be the first Android-based tablet to give Apple the chills.

Story highlights

Amazon Kindle Fire's $200 price and $79 a year bundle make it competition for Apple

People buying Android devices have to consider if product will be obsolete soon

The iPad and Fire are aimed at entirely different markets, experts say

Ever since Amazon unveiled its 7-inch Kindle Fire tablet in September, a lingering phrase has been attached to the low-cost, high-profile device: "the iPad's first true Android competitor."

Unlike all the Android tablets that offer 10-inch screens, roomier storage capacities, built-in cameras and 3G support, the Fire will ship with modest hardware specs. In fact, the Amazon tablet would seem ill-prepared to take on the iPad, if not for a trio of would-be Apple-slaying features.

The Fire will be insanely inexpensive at $200. It will hook into Amazon Prime, the company's two-day package shipping and instant movie rental service, for just $79 a year. And the tablet will be supported by the all brand I.D. and operating efficiencies of a digital storefront that people already use daily to buy everything from physical goods to digital downloads.

In total, the Fire has the potential to be the first Android-based tablet to give Apple the chills. Amazon's digital storefront alone should provoke concern.

But, no, Apple isn't fazed. Barclays analyst Ben Reitzes recently met with Apple's Tim Cook (CEO) and Peter Oppenheimer (CFO), both of whom have a more pessimistic view of the Amazon Fire's future. Stated Reitzes, in a research note first reported by Business Insider:

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"While the pricing at $199 looks disruptive for what seems to be the iPad's most important rising challenge, the Amazon Fire, is important to note that [the Kindle Fire] could fuel further fragmentation in the tablet market, given it represents yet another platform. While compatible with Android, the apps work with Amazon products."

Obviously, Apple has a stake in naysaying competing products, but Reitzes' comments address a legitimate issue. Ever since it debuted three years ago, one of Android's major pain points has been "fragmentation" -- the splitting of different OS versions across multiple devices.

It's a very real problem. Anyone planning to buy an Android device must consider whether his new phone or tablet will be rendered obsolete before its two-year life cycle is up (two years is the typical duration of mobile service contracts). Indeed, it's all too common to buy an Android phone or tablet, and then learn that your device will never officially support new OS updates from Google.

A recent survey of 18 Android phones released since 2007 showed discouraging results: Over half of the devices surveyed stopped receiving OS updates from manufacturers less than one year after initial release.

It's a situation that must make Apple giggle. As Reitzes wrote in his research note, "The more fragmentation, the better, says Apple, since that could drive more consumers to the stable Apple platform."

To be fair, Google has promised an initiative to work on this problem, asking carriers and manufacturers to guarantee device updates for up 18 months after the initial consumer purchase. And fragmentation aside, some analysts are telling us that Apple need not worry about Amazon for an entirely different reason: The iPad and Fire are aimed at entirely different markets.

"The Kindle Fire is really a different device than the iPad, with different functionality and a different price point," Gartner research director Michael Gartenberg told Wired.com in an e-mail. "It's not really a direct competitor. The two can be successful and coexist in the market."

Sarah Rotman Epps, a senior analyst with Forrester Research, told us the Fire really benefits everyone with a stake in the mobile game.

"The Kindle Fire is a good thing for Apple," she says, "because it expands the addressable market for tablets. The Fire grows the whole pie, and Apple still takes the biggest share. The Kindle Fire is also a good thing for the Android ecosystem because people will actually buy this device, which will spur developers to create apps for it, which they can then port over to other Android devices. Android is already fragmented, and one more device doesn't change that significantly."

Let's accept the proposition that Apple need not worry about Amazon. Who should then? Well, the more direct and obvious competitor would be Barnes & Noble, whose Nook e-readers and Nook Color tablets are similar to Amazon's Kindle and Kindle Fire devices.

B&N will be holding a Nook-related press conference in New York on November 7. According to documents leaked to Engadget, this is where the bookseller will likely announce a new version of the Nook Color tablet. This mystery Nook Color seems to have a leg up on the Fire in terms of hardware specs (more storage, a slightly faster processor), but it will also cost more at $250, according to the leaked materials.

Regardless of the Nook Color's final hardware build and price, B&N would still remain vulnerable to Apple and Amazon in one critical area: software integration. Barnes & Noble has far fewer apps than either Amazon and Apple, it doesn't have Amazon's pull as a general-purpose retailer, and will ostensibly rely on third-party services like Mog, Rdio and Hulu Plus to compensate for its lack of proprietary streaming media services.

So the ultimate question is, Should Apple be concerned about Amazon's Android dabblings, or is the Amazon Kindle Fire actually going to murder the Nook?